TRENTON — The state Assembly today passed a bill to overhaul the underfunded pension system in New Jersey’s second largest city.

Jersey City Mayor Steve Fulop said he requested the change, which would increase the city’s retirement age for new employees from 60 to 65, and would require them to have 25 years of service under their belts instead of 20 years.

The bill (A4536) would also increase the amount of time before an employee is eligible to retire early to 30 years from 25 years, and increase the penalties for early retirement.

Fulop, who took office in July, said Jersey City is the only municipality in the state with its own pension system, and that the bill brings it more in line with the state system.

“It’s going to save us over the next, let’s say 8 years, somewhere between $12 and $20 million,” Fulop said. “It’s pretty significant for us.”

Though the bill mostly applies to future employees, it does cut some benefits for current workers. Annual cost of living adjustments for pensions would be reduced from 100 percent of the consumer price index – a measure which broadly tracks inflation – to 50 percent. Fulop said that would make up the bulk of the near-term savings.

Fulop said the city’s unions have taken a neutral stance towards the changes, which are sponsored in the Assembly by Vincent Prieto (D-Hudson) and in the Senate by Sandra Cunningham (D-Hudson) and Brian Stack (D-Hudson).

The proposed changes spring from recommendations made by Buck Consultants, and were referred to in a transition report commissioned by Fulop before he took office.

“Currently, the system is substantially underfunded,” the report said. “The pension system has suffered poor returns on investment and occasional reduced, or even skipped, annual contributions.”

The Assembly voted 79-0 with 1 abstention to approve the bill, which still needs to pass the state Senate.